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Legal & General has secured a substantial agreement to assume several billion pounds worth of pension liabilities from Ford. This move reinforces the insurer’s stronghold in the UK’s fiercely competitive pension buyout landscape.

Valued at £4.6 billion, the transaction will encompass the retirement funds of 35,000 individuals, setting L&G on track to clinch the highest value of deals this year. This achievement comes even as North American entrants intensify competition with more aggressive pricing strategies.

The pension-risk transfer market in the UK, where companies offload their financial commitments to retirees onto insurers, generates a significant portion of L&G’s group revenue. This lucrative market has also caught the attention of private capital powerhouses like Apollo and Brookfield Asset Management.

“Pension-risk transfer is our largest business… it’s crucial for us to demonstrate that we can thrive in a highly competitive market to secure this,” stated Andrew Kail, CEO of institutional retirement at L&G, in a conversation with the Financial Times.

The agreement with the American automaker spans two of Ford’s UK pension schemes: the Ford Hourly Paid Contributory Pension Fund and the Ford Salaried Contributory Pension Fund. Such arrangements offer retirees increased security for their retirement income, safeguarding them even if their former employer faces financial challenges.

Jonathan Wood, chair of the board of trustees for the Ford pensions, said he was “delighted to have achieved this significant further de-risking milestone, providing even greater security for our members”, having worked on the deal for “many years”.

Companies, including NatWest and Rolls-Royce, have sold part or all of their defined benefit schemes to insurers in record volumes in recent years as schemes’ funding levels improved after a rapid rise in government borrowing costs reduced the value of future liabilities. 

Meanwhile, the prospect of lucrative deals has drawn more players into the PRT market. Athora, an insurer backed by Apollo in July announced plans to buy Pensions Insurance Company, which was followed later that month by Brookfield agreeing a £2.4bn deal for life insurer Just Group.

That month, L&G also struck a private credit partnership with Blackstone, in which the US alternative-assets group will source deals for the FTSE 100 company’s annuities business. Blackstone said the partnership could be worth up to $20bn by the end of the decade.

Kail said L&G did the transaction because “they have the ability to generate investment grade credit in the US better than we can and that’s really important”. 

In addition to the Ford transaction, L&G has more than £10bn worth of UK PRT transactions that have either been completed or are the subject of exclusive talks this year, slightly higher than analysts’ forecasts.

Consultants expect companies in the UK to conclude £40bn to £50bn in PRT transactions annually over the next five years, though ratings company Fitch said last month the value of deals this year could drop to about £40bn, from £48bn in 2024.

That is partly owing to fewer large deals being concluded while stiffer competition and tight credit spreads — a narrow gap between corporate and government borrowing costs — has lowered the profits available to insurers on the transactions.